Hezbollah guerrillas in Lebanon have fired a Katyusha rocket into northern Israel, military sources have said.

It hit a poultry shop in the village of Margaliot - close to the Lebanese border and Israeli army positions in the occupied "security zone" in Lebanon - but no one was hurt, the Israeli military said.

Israeli Prime Minister Ehud Barak said that despite the attack he was sticking to
his plan to pull Israeli troops out of Lebanon by July.

Barak: Not optimistic

"The security zone in south Lebanon doesn't prevent and couldn't prevent in the past the firing of Katyushas or mortar bombs on
the settlements of the north," he said.

Mr Barak has vowed to withdraw Israeli forces with or without a peace deal with Syria - the main power in Lebanon.

"I have no doubt we are doing the right thing," he said.

Downbeat

The Israeli prime minister said he was not hopeful about Israeli-Syrian peace talks, which broke down in January.

"I am in general not optimistic about the resumption of talks with the Syrians, but we are responsible and sensitive enough not to totally close the door," he said.

Mr Barak will meet US President Bill Clinton in Washington on Tuesday to discuss the Syrian and Palestinian peace processes, and the withdrawal from Lebanon.

A meeting between President Clinton and Syrian President
Hafez al-Assad last month, intended to promote a resumption of talks, ended with no progress.

Vulnerable

Margaliot residents - who fear an Israeli
withdrawal would leave them vulnerable to
attack - said they saw Sunday's strike as a sign of things to
come.

"Residents of the area feel this is just the beginning,
this is the starting shot," Yoni Yaakobi told Israel
radio.

"We hope the government authorities will help us."

The attack came after an exchange of violence in southern Lebanon that left four Lebanese and two soldiers of Israel's allied South Lebanon Army (SLA) wounded.

Police in Lebanon said three civilians and one Lebanese soldier were wounded by shelling from the Israeli-occupied zone that fell on the main square in the village of Arab Salim.

Several houses, shops and cars were also damaged as Israeli artillery attacked the village in the Iqlim al-Tuffah hills - a stronghold of Hezbollah.

Palestinian pessimism

Prospects for the Palestinian track of the Middle East peace process also appear to be poor.

Palestinian leader Yasser Arafat, who will meet President Clinton next week, said that Israeli-Palestinian talks in Washington "have not moved forward and haven't even touched on the fundamental issues".

He said that Mr Barak's government would fall because the prime minister was "the leader of hardliners and settlers".